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BUSINESS SEGMENTS | 6 Months Ended
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Jun. 30, 2026
Segment Reporting [Abstract] |
BUSINESS SEGMENTS | BUSINESS SEGMENTS We view our operations as three insurance product line segments (annuity, health and life) and the investment and fee income segments. Our segments are aligned based on their common characteristics, comparability of profit margins and the way the chief operating decision maker ("CODM") makes operating decisions and assesses the performance of the business. Our CODM is the Chief Executive Officer. Our insurance product line segments (annuity, health and life) include marketing, underwriting and administration of the policies our insurance subsidiaries sell. The business written in each of the three product categories through all of our insurance subsidiaries is aggregated allowing management and investors to assess the performance of each product category. When analyzing profitability of these segments, we use insurance product margin as the measure of profitability, which is: (i) insurance policy income; and (ii) net investment income allocated to the insurance product lines; less (i) insurance policy benefits; (ii) interest credited to policyholders; (iii) amortization of deferred acquisition costs and present value of future profits; (iv) non-deferred commissions; and (v) advertising expense. Net investment income is allocated to the product lines using the book yield of investments backing the block of business, which is applied to the average insurance liabilities, net of insurance intangibles, for the block in each period. Net insurance liabilities for the purpose of allocating investment income to product lines are equal to: (i) policyholder account values for interest sensitive products; (ii) total reserves before the fair value adjustments reflected in accumulated other comprehensive income (loss), if applicable, for all other products; less (iii) amounts related to reinsured business; (iv) deferred acquisition costs; (v) the present value of future profits; and (vi) the value of unexpired options credited to insurance liabilities. Income from insurance products is the sum of the insurance product margins of the annuity, health and life product lines, less expenses allocated to the insurance product lines. It excludes the income from our fee income business, investment income not allocated to product lines, net expenses not allocated to product lines (primarily holding company expenses) and income taxes. Management believes insurance product margin and income from insurance products provides an additional understanding of the business and a more meaningful analysis of the results of our insurance product lines. We market our products through the Consumer and Worksite Divisions that reflect the customers served by the Company. The Consumer and Worksite Divisions are primarily focused on marketing insurance products, several types of which are sold in both divisions and underwritten in the same manner. The Consumer Division serves individual consumers, engaging with them on the phone, virtually, online, face-to-face with agents, or through a combination of sales channels. This structure unifies consumer capabilities into a single division and integrates the strength of our agent sales forces with one of the largest direct-to-consumer insurance businesses with proven experience in advertising, web/digital and call center support. The Worksite Division focuses on the sale of voluntary insurance benefits, including supplemental health and life insurance products in the workplace for businesses, associations, and other membership groups, interacting with customers at their place of employment and virtually. The investment segment involves the management of our capital resources, including investments and the management of corporate debt and liquidity. Our measure of profitability of this segment is the total net investment income not allocated to the insurance products. Investment income not allocated to product lines represents net investment income less: (i) equity returns credited to policyholder account balances; (ii) the investment income allocated to our product lines; (iii) interest expense on notes payable, investment borrowings and financing arrangements; (iv) expenses related to the Bankers Life and Casualty Company ("Bankers Life") funding agreement backed notes ("FABN") program; and (v) certain expenses related to benefit plans that are offset by special-purpose investment income; plus (vi) the impact of annual option forfeitures related to fixed indexed annuity surrenders. Investment income not allocated to product lines includes investment income on investments in excess of amounts allocated to product lines, investments held by our holding companies, the spread we earn from our Federal Home Loan Bank ("FHLB") investment borrowing and FABN programs and variable components of investment income (including call and prepayment income, adjustments to returns on structured securities due to cash flow changes, income (loss) from COLI and alternative investment income not allocated to product lines), net of interest expense on corporate debt and financing arrangements. The spread earned from our FHLB investment borrowing and FABN programs includes the investment income on the matched assets less: (i) interest on investment borrowings related to the FHLB investment borrowing program; (ii) interest credited on funding agreements; and (iii) amortization of deferred acquisition costs related to the FABN program. Our fee income segment includes the earnings generated from sales of third-party insurance products (primarily Medicare Advantage), services provided to employers through our Worksite Division and the operations of our broker-dealer and registered investment advisor. In November 2025, we announced our intention to exit the fee services business within our Worksite Division to sharpen our focus on the core insurance business. As a result, beginning in the fourth quarter of 2025, the net results of this business are no longer presented within the fee income segment, but are presented within net loss related to divested business as a reconciling item to net income. The exit of the fee services business was substantially complete as of June 30, 2026. Our CODM allocates resources and assesses the performance of each operating segment based on the respective product line insurance margin, investment income not allocated, and fee income metrics described above. Expenses not allocated to product lines include the expenses of our corporate operations, excluding interest expense on debt. We measure segment performance by excluding total investment gains (losses), changes in fair value of embedded derivative liabilities and MRBs, fair value changes related to the agent deferred compensation plan, income taxes, costs related to our three-year project to modernize certain elements of our technology ("TechMod") that are incremental to our normal spend and will not recur following implementation, goodwill and other asset impairment expenses and other non-operating items including earnings attributable to VIEs ("pre-tax operating earnings") because we believe that this performance measure is a better indicator of the ongoing business and trends in our business. Our primary investment focus is on investment income to support our liabilities for insurance products as opposed to the generation of investment gains (losses), and a long-term focus is necessary to maintain profitability over the life of the business. Investment gains (losses), changes in fair value of embedded derivative liabilities and MRBs, fair value changes related to the agent deferred compensation plan, costs related to our TechMod initiative incremental to our normal spend that will not recur following implementation and other non-operating items consisting primarily of earnings attributable to VIEs depend on market conditions or represent unusual items that do not necessarily relate to the underlying business of our segments. Investment gains (losses) and changes in fair value of embedded derivative liabilities and MRBs may affect future earnings levels since our underlying business is long-term in nature and changes in our investment portfolio may impact our ability to earn the assumed interest rates needed to maintain the profitability of our business. Operating information by segment is as follows (dollars in millions):
| Three months ended |  | Six months ended
| June 30, |  | June 30,
| 2026 |  | 2025 |  | 2026 |  | 2025
Revenues: |  |  |  |  |  |  |
Annuity: |  |  |  |  |  |  |
Insurance policy income | $ | 10.2 |  |  | $ | 8.4 |  |  | $ | 18.9 |  |  | $ | 18.2 |
Net investment income | 163.9 |  |  | 155.3 |  |  | 324.9 |  |  | 303.3 |
Total annuity revenues | 174.1 |  |  | 163.7 |  |  | 343.8 |  |  | 321.5 |
Health: |  |  |  |  |  |  |
Insurance policy income | 436.4 |  |  | 412.5 |  |  | 868.4 |  |  | 824.5 |
Net investment income | 75.8 |  |  | 75.9 |  |  | 150.3 |  |  | 151.0 |
Total health revenues | 512.2 |  |  | 488.4 |  |  | 1,018.7 |  |  | 975.5 |
Life: |  |  |  |  |  |  |
Insurance policy income | 234.1 |  |  | 230.4 |  |  | 466.8 |  |  | 459.3 |
Net investment income | 38.4 |  |  | 37.8 |  |  | 76.4 |  |  | 75.4 |
Total life revenues | 272.5 |  |  | 268.2 |  |  | 543.2 |  |  | 534.7 |
Change in market values of the underlying options supporting fixed indexed products | 161.8 |  |  | 79.5 |  |  | 97.3 |  |  | 9.3 |
Investment income not allocated to product lines | 152.9 |  |  | 128.2 |  |  | 270.0 |  |  | 242.0 |
Fee revenue and other income: |  |  |  |  |  |  |
Fee revenue | 18.5 |  |  | 33.5 |  |  | 61.3 |  |  | 80.9 |
Amounts netted in expenses not allocated to product lines | 0.8 |  |  | 1.2 |  |  | 1.8 |  |  | 2.2 |
Total segment revenues | $ | 1,292.8 |  |  | $ | 1,162.7 |  |  | $ | 2,336.1 |  |  | $ | 2,166.1 |
(continued on next page)
| Three months ended |  | Six months ended
| June 30, |  | June 30,
| 2026 |  | 2025 |  | 2026 |  | 2025
Expenses: |  |  |  |  |  |  |
Annuity: |  |  |  |  |  |  |
Insurance policy benefits | $ | 9.0 |  |  | $ | 10.0 |  |  | $ | 20.6 |  |  | $ | 20.3 |
Interest credited | 75.7 |  |  | 73.4 |  |  | 147.5 |  |  | 141.7 |
Amortization and non-deferred commissions | 28.8 |  |  | 25.5 |  |  | 56.6 |  |  | 50.2 |
Total annuity expenses | 113.5 |  |  | 108.9 |  |  | 224.7 |  |  | 212.2 |
Health: |  |  |  |  |  |  |
Insurance policy benefits | 322.3 |  |  | 313.3 |  |  | 653.5 |  |  | 633.6 |
Amortization and non-deferred commissions | 42.7 |  |  | 41.1 |  |  | 85.4 |  |  | 81.7 |
Total health expenses | 365.0 |  |  | 354.4 |  |  | 738.9 |  |  | 715.3 |
Life: |  |  |  |  |  |  |
Insurance policy benefits | 139.3 |  |  | 144.5 |  |  | 282.7 |  |  | 282.6 |
Interest credited | 14.2 |  |  | 13.8 |  |  | 27.9 |  |  | 26.8 |
Amortization and non-deferred commissions | 30.3 |  |  | 27.6 |  |  | 59.8 |  |  | 53.6 |
Advertising expense | 17.5 |  |  | 18.7 |  |  | 35.8 |  |  | 39.9 |
Total life expenses | 201.3 |  |  | 204.6 |  |  | 406.2 |  |  | 402.9 |
Allocated expenses | 152.9 |  |  | 149.4 |  |  | 312.8 |  |  | 310.6 |
Expenses not allocated to product lines | 24.1 |  |  | 26.5 |  |  | 44.5 |  |  | 47.8 |
Market value changes of options credited to fixed indexed annuity and life policyholders | 161.8 |  |  | 79.5 |  |  | 97.3 |  |  | 9.3 |
Amounts netted in investment income not allocated to product lines: |  |  |  |  |  |  |
Interest expense | 51.4 |  |  | 53.3 |  |  | 98.3 |  |  | 107.5 |
Interest credited | 36.5 |  |  | 26.9 |  |  | 72.1 |  |  | 54.0 |
Impact of annual option forfeitures related to fixed indexed annuity surrenders | (5.4) |  |  | (1.5) |  |  | (9.6) |  |  | (5.0) |
Amortization | 1.1 |  |  | 0.8 |  |  | 2.2 |  |  | 1.6 |
Other expenses | 19.9 |  |  | 14.9 |  |  | 15.9 |  |  | 12.1 |
Expenses netted in fee revenue: |  |  |  |  |  |  |
Commissions and other operating expenses | 19.7 |  |  | 32.7 |  |  | 51.9 |  |  | 80.9 |
Total segment expenses | 1,141.8 |  |  | 1,050.4 |  |  | 2,055.2 |  |  | 1,949.2 |
Pre-tax measure of profitability: |  |  |  |  |  |  |
Annuity margin | 60.6 |  |  | 54.8 |  |  | 119.1 |  |  | 109.3 |
Health margin | 147.2 |  |  | 134.0 |  |  | 279.8 |  |  | 260.2 |
Life margin | 71.2 |  |  | 63.6 |  |  | 137.0 |  |  | 131.8 |
Total insurance product margin | 279.0 |  |  | 252.4 |  |  | 535.9 |  |  | 501.3 |
Allocated expenses | (152.9) |  |  | (149.4) |  |  | (312.8) |  |  | (310.6) |
Income from insurance products | 126.1 |  |  | 103.0 |  |  | 223.1 |  |  | 190.7 |
Fee income margin | (1.2) |  |  | 0.8 |  |  | 9.4 |  |  | — |
Investment income not allocated to product lines | 49.4 |  |  | 33.8 |  |  | 91.1 |  |  | 71.8 |
Expenses not allocated to product lines | (23.3) |  |  | (25.3) |  |  | (42.7) |  |  | (45.6) |
Operating earnings before taxes | 151.0 |  |  | 112.3 |  |  | 280.9 |  |  | 216.9 |
Income tax expense on operating income | 31.5 |  |  | 24.8 |  |  | 60.1 |  |  | 48.3 |
Net operating income | $ | 119.5 |  |  | $ | 87.5 |  |  | $ | 220.8 |  |  | $ | 168.6 |
A reconciliation of segment revenues and expenses to consolidated revenues and expenses and net income is as follows (dollars in millions):
| Three months ended |  | Six months ended
| June 30, |  | June 30,
| 2026 |  | 2025 |  | 2026 |  | 2025
Total segment revenues | $ | 1,292.8 |  |  | $ | 1,162.7 |  |  | $ | 2,336.1 |  |  | $ | 2,166.1 |
Total investment losses | (14.7) |  |  | (18.4) |  |  | (37.4) |  |  | (25.2) |
Revenues related to earnings attributable to VIEs | 3.8 |  |  | 7.2 |  |  | 7.6 |  |  | 14.7 |
Fee revenue related to divested business | 3.3 |  |  | — |  |  | 8.5 |  |  | — |
Consolidated revenues | 1,285.2 |  |  | 1,151.5 |  |  | 2,314.8 |  |  | 2,155.6 |
Total segment expenses | 1,141.8 |  |  | 1,050.4 |  |  | 2,055.2 |  |  | 1,949.2 |
Changes in fair value of embedded derivative liabilities and market risk benefits | (34.6) |  |  | (25.2) |  |  | 7.8 |  |  | 44.4 |
Expenses attributable to VIEs | 4.2 |  |  | 7.1 |  |  | 8.8 |  |  | 14.5 |
Expenses related to TechMod initiative | 9.7 |  |  | 3.2 |  |  | 23.4 |  |  | 3.2 |
Expenses related to divested business | 4.4 |  |  | — |  |  | 11.5 |  |  | — |
Other expenses | — |  |  | (2.0) |  |  | — |  |  | (1.5) |
Consolidated expenses | 1,125.5 |  |  | 1,033.5 |  |  | 2,106.7 |  |  | 2,009.8 |
Income before tax | 159.7 |  |  | 118.0 |  |  | 208.1 |  |  | 145.8 |
Income tax expense | 33.8 |  |  | 26.2 |  |  | 44.5 |  |  | 32.5 |
Net income | $ | 125.9 |  |  | $ | 91.8 |  |  | $ | 163.6 |  |  | $ | 113.3 |
Segment balance sheet information is as follows (dollars in millions):
| June 30, |  | December 31,
| 2026 |  | 2025
Assets: |  |  |
Annuity | $ | 14,333.1 |  |  | $ | 13,692.5 |
Health | 9,310.9 |  |  | 9,367.1 |
Life | 4,380.9 |  |  | 4,331.3 |
Investments not allocated to product lines | 11,347.4 |  |  | 10,879.8 |
Assets of our non-life companies included in the fee income segment | 130.9 |  |  | 161.0 |
Assets of our other non-life companies | 358.0 |  |  | 358.9 |
Total assets | $ | 39,861.2 |  |  | $ | 38,790.6 |
Liabilities: |  |  |
Annuity | $ | 14,879.7 |  |  | $ | 14,445.0 |
Health | 9,479.4 |  |  | 9,573.7 |
Life | 4,476.7 |  |  | 4,448.9 |
Liabilities associated with investments not allocated to product lines (a) | 8,226.9 |  |  | 7,425.3 |
Liabilities of our non-life companies included in the fee income segment | 34.0 |  |  | 50.5 |
Liabilities of our other non-life companies | 172.9 |  |  | 209.0 |
Total liabilities | $ | 37,269.6 |  |  | $ | 36,152.4 |
________________ (a) Includes investment borrowings, policyholder account balances related to funding agreements, borrowings related to VIEs and notes payable - direct corporate obligations.

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